Watkins Glen Central School District

Internal Controls Over Selected Financial Activities -
EXECUTIVE SUMMARY

The Watkins Glen Central School District (District) is governed by the Board of Education (Board) which comprises seven elected members. The Board is responsible for the general management and control of the District’s financial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board. The District’s Business Manager/Treasurer and account clerks are responsible for maintaining the District’s financial records. The Board has appointed a claims auditor to audit claims on its behalf.

Scope and Objective

The objective of our audit was to determine if District officials were properly managing District operations to safeguard District assets for the period July 1, 2005 to June 30, 2006. We expanded the scope of the examination to include selected former Superintendent payments from July 1, 2000 to August 31, 2006. Our audit addressed the following related questions:

• Were internal control policies and procedures over administrative expenses and payments made to the former Superintendent appropriately designed and operating effectively?
• Are internal controls over the procurement process appropriately designed and operating effectively to adequately safeguard District assets?

Audit Results

The Board did not establish and implement policies and procedures for administrative expenses, including payments for unused leave upon separation to ensure payments were authorized by contract or Board resolution. As a result, the District overpaid the former Superintendent $14,208 for unused leave balances. The former Superintendent also received a $470 reimbursement for Internet service at her personal residence despite the fact that none of her employment contracts, nor any Board resolution, contained a provision for such a reimbursement.

We found the Board has established written policies over the procurement process; however, the Board did not monitor financial activity for compliance with the policies. The claims auditor did not properly audit 55 of the 137 claims we reviewed (40 percent). Required documentation, such as properly completed requisitions, valid purchase orders, or evidence of compliance with bidding requirements was frequently not present. Further, District staff used procurement cards to make purchases of miscellaneous supplies from a local retail store. Thirty-seven checks, totaling $7,755, were issued for this purpose. These purchases circumvented the claims audit process because the claims auditor approved payment prior to the actual purchase of goods, and did not verify that the actual receipts for the items purchased agreed with the original purchase orders.

We also found individuals continually overrode budgetary controls, generating purchase orders even though sufficient appropriations were not available. Further, the Board was not diligent in monitoring budget status reports to ensure that appropriation accounts were not over-expended or over-encumbered, and that budget transfers were properly approved and made on a timely basis. As a result, several accounts were over-expended throughout the school year, the Business Manager/Treasurer prepared the majority of budget transfers at year-end, and budget transfers over $5,000 were not properly approved. On June 30, 2006, budget transfers totaled in excess of $1 million, of which 70 were line item transfers in excess of $5,000.

Comments of District Officials

The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix A, have been considered in preparing this report. District officials generally agreed with our recommendations and indicated they planned to take corrective action.